McDonald's U.S. sales decline the most in at least a decade

A McDonald's restaurant in Zhuhai, China. The world's largest hamburger chain says a global sales figure fell 2.2 percent in November, as U.S. sales keep falling and it fights to recover from a food-safety scandal in China. Photo: Bloomberg.

(Bloomberg) — McDonald's Corp., the world's largest restaurant chain, posted its worst monthly U.S. sales decline in more than a decade and said a health scare in China took a toll on profit this quarter.

U.S. sales at stores open at least 13 months fell 4.6 percent last month, the Oak Brook, Illinois-based company said today in a statement. Analysts had projected a 1.9 percent decline, according to Consensus Metrix. The news sent the stock down as much as 3.7 percent, the biggest tumble in two years.

McDonald's, which has more than 14,200 domestic restaurants, is struggling to compete with fast-casual chains like Chipotle Mexican Grill Inc. It's also lost its reputation as the low-price leader, sending value-minded diners to rivals such as Burger King Worldwide Inc. and Wendy's Co., said Will Slabaugh, an analyst at Stephens Inc in Little Rock, Arkansas.

“It's a squeeze that will probably continue for the foreseeable future,” he said. “It puts more caution out there that the changes they're trying to make aren't dramatic enough or aren't moving fast enough -- or both.”

The shares fell as low as $92.73 in New York after the results were released, the worst decline since October 2012. McDonald's had lost 0.7 percent this year through the end of last week.

SEVEN-MONTH STREAK

The U.S. sales drop marked the seventh straight month of declines and was the steepest since at least 2003, according to data from Consensus Metrix. The company had posted a 1 percent drop for October. Global same-store sales fell 2.2 percent last month, worse than the 1.7 percent drop predicted by analysts.

The company also is reorganizing its U.S. operations and marketing as it seeks to boost sales.

Though sales aren't shrinking as much globally, McDonald's faces several challenges in its overseas markets -- including a scandal in China and mounting geopolitical tensions in Russia.

Sales in Europe fell 2 percent in November, hurt by “very weak” results in Russia and a slump in France and Germany, McDonald's said. More than 200 McDonald's restaurants in Russia are under government investigation in what has been described as retaliation for sanctions imposed by the U.S. and Europe over Moscow's role in the Ukraine crisis.

EXPIRED MEAT

In Asia, the Middle East and Africa, sales dropped 4 percent. In July, the main supplier for McDonald's in Shanghai was accused of selling expired meat, leading to a plunge in sales. McDonald's Japan unit, which sourced chicken nuggets from the same vendor, has forecast a full-year loss due to the case.

The supplier problem could reduce fourth-quarter profit by 7 to 10 cents a share, McDonald's said. A strengthening U.S. dollar, which is hurting overseas sales, could cut earnings by an additional 7 to 9 cents. The company is scheduled to report fourth-quarter results next month.

McDonald's sales in Japan fell 12 percent in November, according to a separate statement, underscoring the impact of the distributor scandal.